Metcalfe’s Law joins the list of various indicators signaling the undervaluation of Ethereum lately.
Correlation ETH and BTC starts to weaken
Ethereum (ETH) and Bitcoin (BTC), as the two main cryptocurrencies in the world, are constantly in the spotlight of the crypto community. Recently, however, bitcoin has been pulling the blanket over itself, relentlessly renewing historical highs.
Meanwhile, the strengthening of bitcoin above the $ 40,000 mark did not please the majority of altcoins, whose value, paired with BTC, significantly dropped. However, it is possible that as Bitcoin starts to slow down, Ethereum will come to the fore and launch a new rally.
At least recently, the voices of similar ETH-enthusiasts, who consider the currency undervalued, have become more active. They provide various characteristics and indicators to support their forecasts. Also this week it became known that the volume of transactions on the Ethereum blockchain since the beginning of January has grown by about 50% and exceeded the volume of transactions in the Bitcoin network in dollar terms.
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ETH vs BTC Price | Source: TradingView
Metcalfe’s Law promises ETH exponential growth
A recent article by statistics macroeconomist D. Taylor also reinforces the bullish sentiment for Ethereum. He chose Metcalfe’s law as the main argument to substantiate his position. As a result, he came to the conclusion that the price could exceed the $ 20,000 mark.
The main point of Metcalfe’s Law is that the utility of a network is proportional to the number of users of that network. This utility can be represented as a square function, according to which the estimated cost of the network is proportional to the square of the nodes used (Utility = n2).
Accordingly, applying mathematical principles to the Ethereum network demonstrates how the size of the user base affects the growth rate of any network. In the illustration below, you can see that the addition of new nodes (in this case, telephone) causes an exponential increase in the number of new independent connections.
So, two phones can create just one connection, five phones – ten connections. Meanwhile, 12 telephones create 66 unique connections.
This model has already proven its validity when applied to the Bitcoin network and Facebook. It means that the intrinsic value of the network can be created by increasing the number of its users. All this promises an aggressive rise in the Ethereum rate.
Recall that the day before, the currency finally managed to renew its historical maximum. In addition, based on the previous 2017 bull cycle, the significant rally in ETH was preceded by the rise and subsequent consolidation of Bitcoin.
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